What Is Cost per Lead?

The cost per lead is how much an advertiser of the text link, banner or button ad receives for each lead. For example, if a wedding planning website publishes a banner ad for a florist, there is a prearranged agreement between the publisher of the ad and the company advertising. Cost per lead is a term used in advertising that is associated with online advertising.

A cost per lead agreement means that the florist agrees to pay the publisher of the ad for each time someone that clicks on the ad submits their name, email address and phone number for the advertiser to follow-up with as a lead.

It is a different form of advertising than a pay per click agreement. Pay per click agreements pay the publisher for each time someone clicks on the ad that redirects them to the website of the advertiser. A cost per purchase ad pays the publisher each time the ad generates a sale. The cost per lead arrangement requires that the advertiser receive tangible contact information they can then use to convert the lead into a sale.

Each publisher of the content receives a special code. This special code is how the advertiser tracks where the lead comes from. This is how the advertiser knows who to pay for the new lead.

The cost per lead is typically a flat rate fee. For example, the agreement between the publisher and the advertiser may be that for each lead the advertiser pays the publisher $1 US Dollar (USD). The flat rate may be $200 USD per lead. The amount of the lead typically relates to the potential value of the product or service the advertiser is selling.

For example, if the lead is for financial services, the rate is typically higher than that for selling a lead to buy a book. Some advertisers use a tiered scale. With a tiered scale, the more leads that a publisher sends, the more the advertiser pays for the leads from the publisher.

Some advertisers combine a cost per lead strategy with a cost per sale. In these situations, the publisher earns money for generating the lead for the advertiser. If the advertiser is able to sell the financial products or the book to the lead, then the publisher receives a commission on the sale. Advertisers generally use the cost per lead strategy as a way to generate quality leads without having to buy lead lists that may be cold and lower quality.